Tesla’s Shanghai plant dormant, fuels speculation on delivery

By Xie Jun in Shanghai and Wang Cong in Beijing Source:Global Times Published: 2018/12/26 22:48:39

Sales plunge in China amid tariff pressure, competition

The construction site of Tesla's Gigafactory located in the Lingang industrial zone in Shanghai shows no active signs of construction work like cranes working or logistics trucks driving in and out of the site. Photo: Xie Jun/GT

Dormant activity at the site of the Tesla Gigafactory outside of Shanghai is fueling speculation that the company may not be able to deliver units as scheduled amid strong competition in China.

When the Global Times visited the site on Wednesday, there were no cranes at work or logistics vehicles entering or leaving, making it look more wasteland than building site.

It's not a positive picture for the US-based carmaker, which has moved to cut prices several times in China in recent months. The company has previously announced plans to start mass production in the country next year, scrambling to maintain its share in the world's largest electric vehicle (EV) market.

The new Tesla Gigafactory is intended to be built on a massive plot of land in the remote Lingang industrial zone, about 1.5 hours from downtown Shanghai. There are streets on three sides of the site; on the fourth lies the Suitang River.

From what the Global Times saw, Tesla is very serious about keeping the project under wraps. The construction site is surrounded by black clapboards that block the view of anyone who's passing by.

It is further separated from the adjacent roads by small creeks and fences. Signs forbid trespassing as well as aerial photography.

Peeking through gaps in the walls, the Global Times saw almost no signs of construction, such as heavy machinery at work. The land has been leveled, but there were almost no construction workers to be seen.

A security guard, who said he had just recently started to work there, hadn't noticed much construction work during daylight hours. He also said he did not know what project he was guarding when asked by the Global Times.

However, a construction worker who was clearing land around the site confirmed to the Global Times that the plot was for Tesla's Gigafactory. Another security guard at Sany, whose plant is near the Tesla factory, said the same thing.

Tesla's slow progress with the factory has led to speculation in some domestic media about whether production will start as planned.

According to a post on the Municipality's official WeChat "Shanghaifabu" account recently, Tesla's factory is expected to start partial production in the second half of next year.

A construction supervisor surnamed Dai told the Global Times it can take about one year from start to production if construction work is in full swing for a medium-sized manufacturer.

Tesla refused to disclose proceedings on the Shanghai plant when contacted by the Global Times on Wednesday.

Tesla has bet on a strategy to localize production to cut costs and extend its footprint in the Chinese market, but any benefits from that strategy will be "too slow in coming to help Tesla's pressing problems," said Zeng Zhiling, an analyst at Shanghai-based consultancy LMC Automotives.

Tesla's sales in the Chinese market plunged 70 percent year-on-year to just 211 vehicles in October, following a 37 percent drop in the third quarter, according to the China Association of Automobile Manufacturers.

Following plunging sales as well as tariff changes, Tesla moved to cut prices on Model 3, Model X and Model S within two months, according to media reports. The Chinese government is lowering tariffs for imported EVs and firms like Tesla stand to benefit.

"Tariffs resulting from the China-US trade war may have taken the biggest bite out of Tesla's sales in China," Zeng told the Global Times, pointing to numerous changes in tariffs and in turn prices.

But there might be a deeper problem for Tesla - rising competition from domestic players such as BYD Auto and NIO.

In November, BYD sold more than 28,000 EVs, up 123 percent year-on-year, while NIO delivered 3,089, according to data from the company.

A taxi driver surnamed Wang told the Global Times that Roewe had already put more than 300 electric cars into use as taxis in Shanghai. The brand is about to put another 4,000 electric taxis into operation in the city, the driver disclosed.